Free Money Costs A Fortune

By Robert Carpenter, Editor | April 2009 Vol. 64 No. 4

In his proposed 2010 budget, President Obama has proposed a huge increase for sewer and water funding. His budget proposal is $2.4 billion for the Clean Water State Revolving Fund and $1.5 billion for the Drinking Water State Revolving Funds.

(See the report from our Washington Editor Stephen Barlas). Of course, Congress will actually have to appropriate the additional funds. That may be a challenge in view of our soaring and ever-increasing super-sized budget deficit.

I’m all for more sewer and water funding: we needed it 20 years ago. Small problems then are mega-problems now. But it’s one thing to wake up and turn on the light; it’s another issue entirely when it comes to funding the light bulb.

Let us not forget the original intent of the federal fund programs – to jump start cities’ repair and expansion efforts for their seriously polluting infrastructure. Little things like mercury in fish and burning rivers tend to get a lot of attention.

The funding was meant to be a major booster shot; then cities and states were supposed to assume their share of the load. That’s why the programs have to be periodically re-authorized and re-funded – they were supposed to have expired years ago. But political pressure has kept the financial pipeline flowing though at increasingly reduced levels.

Now the talk is to open the tap back up and provide free-flowing billions to projects around the country. However, this may be too good to be true without a commitment and acceptance of responsibility from the municipal community.

The revolving funds have largely been seen as the primary funding mechanisms for cities, particularly large municipalities. Mayors and city councils couldn’t resist the temptation of pleasing voters by keeping sewer and water rates artificially low, often for 10 years or more. If a loaf of bread increases in price, doesn’t it make sense that your cost of labor and equipment – just to maintain – your sewer/water system would increase in cost as well? As systems have continued to deteriorate and fail, some cities are finally desperate enough to raise their users fees. The problem is that raising fees to levels high enough to maintain systems creates a scenario similar to last summer when gasoline jumped to over $4 a gallon in a matter of months – sticker shock quickly set in among consumers. And that creates a different subset of economic woes.

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